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How Does AngelList Make Money? The AngelList Business Model In A Nutshell

AngelList is an American platform for angel investors, start-ups, and those looking to be employed in start-ups, launched in 2010 by Naval Ravikant and Babak Nivi with a mission to democratize the investment process. AngelList makes money via Syndicates, a “pop-up” venture capital fund. Also, for fund or syndicate managers, AngelList Venture is a one-stop solution for legal, regulatory, and back-office services. Lastly, AngelList Recruit is a recruitment platform for start-ups of all sizes to fill vacant positions.

History of AngelList

AngelList is an American platform for angel investors, start-ups, and those looking to be employed in start-ups.

The platform was launched in 2010 by Naval Ravikant and Babak Nivi with a mission to democratize the investment process. The pair were already running a successful blog on entrepreneur financing and would periodically receive requests from entrepreneurs who wanted to connect with investors, and vice versa.

Realizing the lack of connection between entrepreneurs and investors, the co-founders listed 50 angel investors online who were willing to invest in start-ups that required funding. Three years later, AngelList Syndicates was launched. Syndicates are single-deal start-up investment funds that allowing multiple investors to pool their capital. Each syndicate is led by an experienced angel investor who vets each investment and demonstrates confidence to others in the pool.

AngelList is sometimes called LinkedIn for start-ups because angel investors and venture capital firms use the platform to find or research high potential start-ups. However, it’s also a crowdfunding service allowing entrepreneurs to fund world-changing ideas.

The company has more than $3 billion in assets under management and has funded 77 unicorns to date. 

AngelList revenue generation

AngelList Syndicates

AngelList Syndicates are essentially a “pop-up” venture capital fund.

Here is how this fundamental process works and how the company makes money from it.

  1. The syndicate creator or lead invites others to pool their capital in a start-up.
  2. AngelList manages the above process and charges a 5% “carry” fee for doing so.
  3. The syndicate lead then pockets 15%.

Note that a carry fee is simply a percentage of the upside of an investment. If an angel investor receives a return of $200,000 on a $50,000 investment, the gain would be $150,000. Of that amount, 5% ($7,500) would go to the company and 15% to the syndicate lead.

AngelList Venture

For fund or syndicate managers, AngelList Venture is a one-stop solution for legal, regulatory, and back-office services.

Here, there are three options:

  1. Traditional Funds – a 1% admin fee is charged on funds capped at $25,000 per year. This option is suitable for three or more deals per year.
  2. Rolling Funds – the admin fee here is 0.15% of the total annual contributed capital. This option is best suited to three or more options per quarter.
  3. Syndicates – with a flat, one-time setup fee of $8,000. This option allows fund managers to create a new Special Purpose Vehicle (SPV) business entity for each investment. The setup fee is reduced to $4,000 for follow-on investments.

AngelList also charges a 5% carry fee for each syndicate member in all three scenarios.

AngelList Recruit

AngelList Recruit is a recruitment platform for start-ups of all sizes to fill vacant positions.

The free Starter plan gives businesses limited access to 2.3 million candidates. It also gives them the ability to post unlimited job listings and process inbound applicants.

For those desiring more functionality, there are a couple of paid options:

  1. Pro ($250/month) – offering unlimited access to candidates, candidate profiles, advanced search filters, and workflow tools. The AngelList Curated feature is also available, giving hiring managers access to interview-ready candidates and dedicated technical sourcing. Curated hires attract a further 20% fee based on the salary of the position being filled.
  2. Team – for those who need to hire quickly and spend limited time on sourcing with a dedicated account manager. Custom prices are available on request.

Key takeaways:

  • AngelList is an American platform connecting entrepreneurs and investors. It was founded by Naval Ravikant and Babak Nivi in 2010 to democratize the investment process.
  • AngelList charges a 5% carry fee for any return a syndicate member makes on an investment. It also charges administration fees in exchange for providing legal, regulatory, and back-office fund management services.
  • AngelList offers two paid options for businesses that need to recruit staff. Additional fees are applicable if managers desire a list of interview-ready candidates and dedicated technical sourcing.

Read Also: How Does Product Hunt Make Money, LinkedIn Multi-Sided Platform Business Model, How Does Glassdoor Make Money, How Does Indeed Make Money, How Does Upwork Make Money, How Does Fiverr Work And Make Money.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"